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Despite a glutted market, buyers step up for new 30-year T-bonds

August 13, 2009 | 12:13 pm

The Treasury pulled another rabbit out of its hat today, easily selling a record $15 billion in new 30-year bonds -- in a market already flooded with government debt.

The bonds sold at an annualized yield of 4.54%, slightly below the 4.55% forecast by bond dealers in a Bloomberg News survey.

"The appetite . . . was impressive, given all the worries about supply," said George Goncalves, fixed-income rates strategist at Cantor Fitzgerald in New York.

Indirect bidders, a category of investors that includes foreign central banks, bought 48.1% of the bonds, about on par with their purchases at the last few auctions of 30-year issues.

Some investors are running back to Treasuries across the board today, as the disappointing retail sales report for July bolsters the case for continued weakness in the economy, even if the recession has ended.

The yield on five-year T-notes tumbled to 2.56% from 2.68% on Wednesday.

Still, the government is paying significantly more to borrow than it did a few months ago. The five-year T-note yielded just 2% in mid-May. The 30-year bond yielded 4.09% then.

Today’s sale concludes a total of $75 billion in Treasury note and bond sales this week as the Obama administration borrows at an unprecedented pace to plug the budget deficit -- which reached a stunning $1.27 trillion in the first 10 months of the government’s fiscal year, through July.

-- Tom Petruno